The data in the accompanying table represent the annual rates of return for various stocks. If you only wish to invest in two stocks, which two would you select if your goal is to have low correlation between the two investments? Which two would you select if your goal is to have one stock go up when the other goes down?
Click the icon to view the table of annual rates of returns.
If your goal is to have low correlation between the two investments, which two should stocks should you select?
A. Stock B and Stock C
B. Stock A and Stock B
C. Stock A and Stock C
If your goal is to have one stock go up when the other goes down, you should select since the linear correlation coefficient for these two stocks
is closest to + 1.
has the greatest absolute value.
is closest to - 1.
is closest to 0.